Redbox Hasn’t Agreed to Longer Delay on Warner Bros. DVDs

Jan. 6 (Bloomberg) -- Coinstar Inc., owner of the Redbox
DVD-rental machines, said it hasn’t agreed to Time Warner Inc.’s
effort to double a 28-day delay in making new Warner Bros.
movies available for rental.

No revised terms have been reached, Coinstar said today in
an e-mailed statement, referring to reports that said a new
accord with Warner Bros. established a 56-day delay for new
movies. A deal for a 28-day delay on new films expires Jan. 31,
according to Marci Maule, a Coinstar spokeswoman.

The standoff with Warner Bros. may signal Coinstar plans to
skirt the delay by buying DVDs from third parties, said Eric
Wold, a San Francisco-based analyst with B. Riley & Co. Coinstar
relies more on new releases than competing services like Netflix
Inc. because the Redbox kiosk limits the number of movies
offered.

“I don’t anticipate Redbox would accept a longer delay,”
Wold said in an interview. “I wouldn’t be surprised if they
have an agreement with some other wholesaler or supplier that
would let them buy without going into a store.”

Longer Delay

Warner’s home-video president, Kevin Tsujihara, told the
Financial Times in October that the studio wants to lengthen the
28-day delay. Some studios were considering rental bans as long
as 60 days, people familiar with the matter told Bloomberg News
that month, leading Coinstar Chief Executive Officer Paul Davis
to signal resistance.

Coinstar has “workarounds” to obtain new-release DVDs
from studios that seek to impose a longer delay, Davis said on
an Oct. 27 conference call. The company can purchase DVDs from
third parties as soon as they are released for sale by the
studios.

“We’ll evaluate that and see if we want to employ that
tack to protect the windows that we enjoy today,” Davis said on
the call.

Buying from third parties may have little or no effect on
Coinstar’s costs, analyst Wold said today. Higher costs per copy
would be offset by Coinstar focusing on the most popular movies
and purchasing fewer overall, he said. The company also would be
able to sell used DVDs back to vendors. Resale is prohibited
under the agreement with Warner.

Financial ‘Non-Event’

“It could be minimal or a non-event financially,” Wold
said. “They would not have to buy the not-so-appealing
straight-to-DVD releases Warner forces on them.”

Netflix, which operates a movie-streaming and DVD-by-mail
service that offers thousands of library titles, agreed to the
Warner Bros.’ longer delay, Variety reported yesterday. The
website AllThingsD reported earlier that a new Warner Bros. pact
with Redbox, Netflix and Blockbuster will double the current
delay to 56 days.

Jim Noonan, a Warner Bros. spokesman, said the company had
no comment. Steve Swasey, a spokesman for Los Gatos, California-based Netflix, declined to comment, as did Aaron Johnson, a
spokesman for Englewood, Colorado-based Dish.

Coinstar, which operated about 34,400 DVD rental kiosks as
of Dec. 1, fell 5.5 percent to $40.98 at the close in New York.
Shares of the Bellevue, Washington-based company declined 19
percent last year. New York-based Time Warner fell 0.7 percent
to $36.55 after gaining 12 percent in 2011.

Coinstar has deals with Sony Pictures, Lions Gate
Entertainment Corp. and Paramount Pictures studio to obtain DVDs
for rental on the same day they become available for sale, Davis
said in October, calling that the best arrangement for
consumers.

“Some studios want a window and we try to work with
them,” Davis said in an Oct. 27 interview. “There’s a point to
where it might not make sense.”